UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

or

Commission File No. 0-516

SONOCO PRODUCTS COMPANY

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

The aggregate market value of voting common stock held by nonaffiliates of the registrant (based on the New York Stock Exchange closing price) on June 25, 2004, which was the last business day of the registrant’s most recently completed second fiscal quarter, was $2,257,589,743. Registrant does not (and did not at June 25, 2004) have any non-voting common stock outstanding.

As of February 18, 2005, there were 98,981,756 shares of no par value common stock outstanding.

Documents Incorporated by Reference

Portions of the Proxy Statement for the annual meeting of shareholders to be held on April 20, 2005, which statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates, are incorporated by reference in Part III.

TABLE OF CONTENTS

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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES

Forward-Looking Statements

This Annual Report on Form 10-K includes and incorporates by reference “forward-looking statements” within the meaning of the securities laws. All statements that are not historical facts are “forward-looking statements.” The words “estimate,” “project,” “intend,” “expect,” “believe,” “plan,” “anticipate,” “objective,” “goal,” “guidance” and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding offsetting high raw material costs, adequacy of income tax provisions, refinancing of debt, adequacy of cash flows, effects of acquisitions and dispositions, adequacy of provisions for environmental liabilities, financial strategies and the results expected from them, and producing improvements in earnings.

These forward-looking statements are based on current expectations, estimates and projections about our industry, management’s beliefs, and certain assumptions made by management. Such information includes, without limitation, discussions as to guidance and other estimates, expectations, beliefs, plans, strategies and objectives concerning our future financial and operating performance. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed or forecasted in such forward-looking statements. Such risks and uncertainties include without limitation: availability and pricing of raw materials; success of new product development and introduction; ability to maintain or increase productivity levels; international, national and local economic and market conditions; fluctuations in obligations and earnings of pension and postretirement benefit plans; ability to maintain market share; pricing pressures and demand for products; continued strength of our paperboard-based engineered carrier and composite can operations; anticipated results of restructuring activities; resolution of income tax contingencies; ability to successfully integrate newly acquired businesses into the Company’s operations; currency stability and the rate of growth in foreign markets; use of financial instruments to hedge foreign currency, interest rate and commodity price risk; actions of government agencies; loss of consumer confidence; and economic disruptions resulting from terrorist activities.

We undertake no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties, and assumptions, the forward-looking events discussed in this Annual Report on Form 10-K might not occur.

References to our Web Site Address

References to our Web site address and domain names throughout this Annual Report on Form 10-K are for informational purposes only, or to fulfill specific disclosure requirements of the Securities and Exchange Commission’s rules or the New York Stock Exchange Listing Standards. These references are not intended to, and do not, incorporate the contents of our Web sites by reference into this Annual Report on Form 10-K.

PART I

Item 1. Business

	The Company is a South Carolina corporation founded in Hartsville, South Carolina in 1899 as the Southern Novelty Company. The name was subsequently changed to Sonoco Products Company (the “Company” or “Sonoco”). Sonoco is a manufacturer of industrial and consumer packaging products and a provider of packaging services, with 322 locations in 35 countries.
	Information regarding the Company’s acquisitions, dispositions, joint ventures and restructuring activities is provided in Notes 2, 3 and 4 to the Consolidated Financial Statements on pages F-8 through F-13 of this Annual Report on Form 10-K.

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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES

(b)	Financial information about segments –
	Information regarding the Company’s reportable segments is provided in Note 16 to the Consolidated Financial Statements on pages F-29 through F-31 of this Annual Report on Form 10-K.
(c)	Narrative description of business –
	Product Distribution – Each of the Company’s operating units has its own sales staff and maintains direct sales relationships with its customers. Some of the units have service staff at the manufacturing facility that interacts directly with the customers. The North American operations in the Engineered Carriers and Paper segment also have a customer service center located in Hartsville, South Carolina that is the main contact point between these business units and customers. Divisional sales personnel also provide sales management, marketing and product development assistance as needed. For those customers that buy from more than one business unit, the Company often assigns a single representative or team of specialists to handle that customer’s needs. Product distribution is normally directly from the manufacturing plant to the customer. There are cases where product is warehoused in a mutually advantageous location to be shipped to the customer as needed.
	Products and Services – The following discussion outlines the principal products produced and services rendered by the Company.
	Engineered Carriers and Paper The Engineered Carriers and Paper segment accounted for 44% of the Company’s net sales in 2004. This business serves its market through 126 converting facilities on five continents. Sonoco’s paper operations provide the primary raw material for the Company’s fiber-based packaging. This vertical integration strategy is supported by 27 paper mills with 38 paper machines and 47 recovered paper collection facilities throughout the world. In 2004, Sonoco had the capacity to manufacture approximately two million tons of recycled paperboard. The products, services and markets of the Engineered Carriers and Paper segment are as follows:

Sonoco’s engineered carriers (tubes and cores) business is the Company’s largest revenue-producing business, representing approximately 34%, 36% and 35% of consolidated net sales in 2004, 2003 and 2002, respectively.

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	Consumer Packaging
	The Consumer Packaging segment accounted for 36% of the Company’s net sales in 2004. The operations in this segment consist of 52 plants throughout the world. The products, services and markets of the Consumer Packaging segment are as follows:

	Sonoco’s composite can business is the Company’s second largest revenue-producing business, representing approximately 17%, 19% and 20% of consolidated net sales in 2004, 2003 and 2002, respectively.
	Packaging Services
	The Packaging Services segment accounted for 10% of the Company’s consolidated net sales in 2004. The products, services and markets of the Packaging Services segment are as follows:

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	Other
	In addition to the products and services outlined in each of the segments above, the Company produces the following products:

	Raw Materials – The principal raw materials used by the Company are recovered paper, paperboard, metal and plastic resins. Recovered paper used in the manufacture of paperboard is purchased either directly from suppliers near manufacturing operations or through the Company’s recovered paper operations. Other raw materials are purchased from a number of outside sources. The Company considers the supply and availability of raw materials to be adequate to meet its needs.
	Patents, Trademarks and Related Contracts – Most inventions are made by members of Sonoco’s development and engineering staff and are important to the Company’s organic growth. Patents have been granted on many inventions created by Sonoco staff in the United States and other countries. These patents are managed globally by a Sonoco intellectual capital management team through one of the Company’s subsidiaries, Sonoco Development, Inc. (SDI). SDI globally manages patents, trade secrets, confidentiality agreements and license agreements. Some patents have been licensed to other manufacturers, including Sonoco’s associated companies. Sonoco also licenses a few patents from outside companies and universities for business unit use. U.S. patents expire after 17 or 20 years, depending on the patent issue date. New patents replace many of the abandoned or expired patents.
	A second intellectual capital subsidiary of Sonoco, SPC Resources, Inc., globally manages Sonoco’s trademarks, service marks, copyrights and Internet domain names. Most of Sonoco’s products are marketed worldwide under trademarks such as SONOCOÒ, SONOTUBEÒ, SAFE-TOPÒ, SEALED SAFEÒ, DUROÒ and DUROXÒ. Sonoco’s registered Web domain names such as www.sonoco.com and www.sonotube.com provide information about Sonoco, its people and products. Trademarks and domain names are also licensed to subsidiaries and other companies where appropriate.
	Seasonality – The businesses of the Company’s segments are not seasonal to any significant degree.
	Dependence on Customers – The Company serves many customers with many different product lines, and no single customer represents 10% of consolidated net sales. On an aggregate basis, the five largest customers in the Engineered Carriers and Paper segment accounted for approximately 11.4% of segment sales and the five largest customers in the Consumer Packaging segment accounted for approximately 19.9% of segment sales. The dependence on a few customers in the Packaging Services segment is more significant as the five largest customers in this segment accounted for approximately 74% of segment sales.

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	Backlog – Most customer orders are manufactured with a lead time of three weeks or less. Therefore, the amount of backlog orders at December 31, 2004 and 2003 was not material. The Company expects all backlog orders at December 31, 2004 to be shipped during 2005.
	Competition – The Company’s products are sold in highly competitive market environments, which include paper, textiles, films, food, chemicals, pharmaceuticals, packaging, construction, and wire and cables. Within each of these markets, supply and demand is the major factor controlling the market environment. Additionally, and to a lesser degree, these markets are influenced by the overall rate of economic activity. Throughout the year, the Company remained highly competitive within each of the markets served. The Company manufactures and sells many of its products globally. Having operated internationally since 1923, the Company considers its ability to serve its customers worldwide in a timely, consistent and cost-effective manner a competitive advantage. The Company also believes that its technological leadership, reputation for quality and vertical integration are competitive advantages. Furthermore, the Company’s product development and global expansion reflect the rapidly changing needs of its major customers, who demand high-quality, state-of-the-art, environmentally compatible packaging wherever they choose to do business. In addition, the Company is focusing on productivity improvements with the objective of being the low-cost producer in value-added niches of the packaging market. The Company continues to pursue several productivity initiatives aimed at reducing costs and improving processes using the latest in information technology.
	Research and Development – Company-sponsored research and development expenses totaled approximately $15.4 million in 2004, $14.2 million in 2003 and $13 million in 2002. Customer-sponsored research and development costs were not material for each of these periods. Significant projects in Sonoco’s Engineered Carriers and Paper segment during 2004 included efforts to design and develop a new generation of products for the construction industry and to enhance performance characteristics of the Company’s engineered carriers in the textile, film and paper packaging areas, as well as projects aimed at enhancing productivity. The Consumer Packaging segment continued to invest in new materials technology and new process technology for a range of packaging options, including composite cans and other forms of shaped packaging during 2004.
	Compliance with Environmental Laws – Information regarding compliance with environmental laws is provided in Note 14 to the Consolidated Financial Statements on pages F-27 and F-28 of this Annual Report on Form 10-K.
	Number of Employees – Sonoco had approximately 17,100 employees as of December 31, 2004.
(d)	Financial information about geographic areas –
	Financial information about geographic areas is provided in Note 16 to the Consolidated Financial Statements on pages F-29 through F-31 of this Annual Report on Form 10-K and in the information about market risk under the caption “Risk Management” in Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 20 and 21 of this Annual Report on Form 10-K.
(e)	Available information –
	The Company electronically files with the Securities and Exchange Commission (SEC) its annual reports on Form 10-K, its quarterly reports on Form 10-Q, its periodic reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934. The SEC maintains a site on the Internet, www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Sonoco also makes these filings available free of charge through its Internet site, www.sonoco.com, as soon as reasonably practical after the electronic filing of such material with the SEC.

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(f)	Executive Officers of the Registrant –

Item 2. Properties

The Company’s corporate offices are owned and operated in Hartsville, South Carolina. There are 116 owned and 70 leased facilities used by operations in the Engineered Carriers and Paper segment, 25 owned and 27 leased facilities used by operations in the Consumer Packaging segment, four owned and 15 leased facilities used by operations in the Packaging Services segment, and 19 owned and 23 leased facilities used by all other operations. Europe, the largest foreign geographic location, has 58 manufacturing locations.

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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES

Item 3. Legal Proceedings

Information regarding legal proceedings is provided in Note 14 to the Consolidated Financial Statements on pages F-27 and F-28 of this Annual Report on Form 10-K.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s common stock is traded on the New York Stock Exchange under the stock symbol “SON.” As of December 31, 2004, there were approximately 37,600 shareholder accounts. Information required by Item 201(d) of Regulation S-K can be found in Part III, Item 12 of this Annual Report on Form 10-K. The following table indicates high and low sales prices for common stock of Sonoco as reported on the New York Stock Exchange as well as cash dividends declared per common share:

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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES

Item 6. Selected Financial Data

The following table sets forth the Company’s selected consolidated financial information. The information presented below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s historical consolidated financial statements and the notes thereto. The selected statement of income data and balance sheet data are derived from the Company’s Consolidated Financial Statements.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

During 2004, the Company undertook several key strategic initiatives including:

	-	The acquisition of CorrFlex Graphics, LLC (“CorrFlex”), one of the nation’s largest point-of-purchase display companies, with annual sales of approximately $200 million.
	-	The completion of a business combination with Ahlstrom Corporation, Helsinki, Finland (“Ahlstrom”), to combine each of the companies’ respective European paper-based tube/core and coreboard operations into a joint venture that operates under the name Sonoco-Alcore S.a.r.l., of which the Company owns 64.5%.
	-	The start-up of several plants producing new products and serving new markets.

Net sales for the Company increased to $3.16 billion in 2004 from $2.76 billion in 2003 primarily as a result of the acquisition of CorrFlex, increased volumes, higher selling prices, the favorable impact of foreign exchange translation and the impact of two months of sales from Sonoco-Alcore S.a.r.l.

The Company reported net income of $151.2 million for 2004, compared with $138.9 million for 2003. Earnings growth in 2004 resulted in large part from strong sales, which were driven by acquisitions, new product and market development and geographical expansion; from the reduction in cost structure, which resulted from restructuring actions completed since 2001; and from higher productivity improvement in virtually all of the Company’s businesses, partially as a result of increased unit volumes. Rising material costs, inflation and escalating energy prices negatively impacted operating earnings. Net income for 2004 and 2003 included after-tax restructuring charges of approximately $14.4 million and $36.8 million, respectively. Net income for 2004 was positively impacted by $9.3 million due to the recognition of certain tax benefits and a $7 million after-tax reduction in expense resulting from the Company’s adoption of new accounting guidance on the Medicare Prescription Drug Improvement and Modernization Act of 2003. Net income for 2003 was positively impacted by the $49.4 million after-tax gain on the sale of the High Density Film business, which is classified as discontinued operations on the Company’s Consolidated Statements of Income for 2002 and 2003.

Cash flow remained strong with cash generated from operations totaling $252.2 million in 2004, which, in conjunction with proceeds from the issuance of debt, was used to purchase CorrFlex, fund capital expenditures, pay dividends and increase cash investments by $32.9 million. To sustain strong cash flow, the Company remains focused on growing sales by developing new products and markets, expanding geographically and making appropriate acquisitions. At the same time, the Company is committed to aggressively controlling costs and effectively employing its capital by paying close attention to working capital management and capital expenditures.

Restructuring Charges, One-Time Items and Other Activities

Restructuring Charges

During 2004, the Company recognized restructuring charges, net of adjustments, of $19 million ($16.2 million after tax), primarily related to 10 plant closings in the Engineered Carriers and Paper segment, five plant closings in the Consumer Packaging segment and one plant closing in All Other Sonoco. Included in this amount, is $2.2 million in restructuring charges, which resulted from a correction to previously reported financial statements at the Company’s wholly owned subsidiary in Spain. Restructuring charges recognized during 2004 consisted of severance and termination benefits of $6.5 million, asset impairment charges of $6.2 million and other exit costs of $6.3 million, consisting of building lease termination charges and other miscellaneous exit costs. These costs are associated with the Company’s general plans, announced in August 2003, to reduce its overall cost structure by $54 million pretax. The Company expects to recognize an additional cost of approximately $4.2 million pretax in the future associated with these actions. The objectives of these restructuring actions are to realign and centralize a number of staff functions and eliminate excess plant capacity. As part of the target to reduce its cost structure by $54 million, the Company expects to announce in 2005 the closing of up to five additional plants. Restructuring charges associated with these expected 2005 actions cannot be estimated at this time. With the exception of ongoing pension subsidies and certain building

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lease termination expenses, costs associated with the 2004 restructuring actions are expected to be paid by the end of the fourth quarter 2005 using cash generated from operations.

In connection with the Company’s restructuring actions, asset impairment charges, which were related to the writeoff/down of assets associated with nine plant closings, of $6.2 million were recognized during 2004. Impaired assets were written down to the lower of carrying amount or fair value, less estimated costs to sell, if applicable. Of the $6.2 million, the Company recognized writeoffs/downs of impaired equipment of $4.5 million and writeoffs/downs related to facilities held for sale of $1.7 million. In addition, the Company recognized pension costs of $2 million relating to curtailments associated with restructuring actions.

During 2004, the Company also recorded non-cash income in the amount of $1.8 million after tax in order to reflect Ahlstrom’s portion of restructuring costs that were charged to expense. This income, which resulted from the expected closure of certain plants that the Company contributed to Sonoco-Alcore S.a.r.l., is included in “Equity in earnings of affiliates/minority interest in subsidiaries” in the Company’s Consolidated Statements of Income.

During 2003, the Company recognized restructuring charges, net of adjustments, of $50.1 million pretax ($35.3 million after tax). Additionally, the Company’s High Density Film business, which was divested in 2003, incurred restructuring charges of $.2 million pretax ($.1 million after tax) in 2003. The 2003 restructuring charges were primarily related to six plant closings in the Engineered Carriers and Paper segment, three plant closings in the Consumer Packaging segment, three plant closings in All Other Sonoco and a global reduction in salaried positions. These restructuring charges consisted of severance and termination benefits of $37.7 million, asset impairment charges of $8.4 million and other exit costs of $4 million, consisting of building lease termination charges and other miscellaneous exit costs.

During 2003, the Company also recorded restructuring charges of $1.5 million after tax related to affiliates/minority interest in subsidiaries. The restructuring charges are included in “Equity in earnings of affiliates/minority interest in subsidiaries” in the Company’s Consolidated Statements of Income.

During 2002, the Company recognized restructuring charges of $10.4 million pretax ($6.7 million after tax). Additionally, the Company’s High Density Film business, which was divested in 2003, incurred restructuring charges of $2.2 million pretax ($1.4 million after tax) in 2002. The 2002 restructuring charges were primarily related to three plant closings in the United States in the Consumer Packaging segment, one plant closing in the United States in the Engineered Carriers and Paper segment, one plant closing in All Other Sonoco and severance costs associated with plant consolidations in Europe. The restructuring charges consisted of severance and termination benefits of $10.5 million, asset impairment charges of $.4 million and other exit costs of $1.7 million, consisting of building lease termination charges and other miscellaneous costs.

Acquisitions/Joint Ventures

The Company completed nine acquisitions during 2004, with an aggregate cost of approximately $367 million, of which, $267 million was paid in cash. Acquisitions in the Company’s Engineered Carriers and Paper segment included engineered carrier manufacturers in Australia, China and the United States along with the formation of a joint venture as described below. During 2004, the Company also acquired CorrFlex, one of the nation’s largest point-of-purchase display companies. The acquired business, which is known as Sonoco CorrFlex, LLC, is reflected in the Packaging Services segment. Acquisitions in the Company’s Consumer Packaging segment included a composite can manufacturer in Australia, a manufacturer of rotogravure cylinders in Canada and the remaining ownership interest in a manufacturer of rotogravure cylinders in Charlotte, N.C. The Company also acquired certain assets of a wooden reel refurbisher in Alabama, which are classified as components of All Other Sonoco.

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As the acquisition of CorrFlex was considered material to the Company’s financial statements, unaudited pro forma combined historical results, as if CorrFlex had been acquired at the beginning of fiscal 2004, 2003 and 2002, are provided in the table below:

The pro forma results include amortization of intangibles and interest expense on debt assumed to finance the purchase. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of each period presented, nor are they necessarily indicative of future consolidated results.

In the fourth quarter of 2004, the Company completed a business combination with Ahlstrom to combine each of the companies’ respective European paper-based tube/core and coreboard operations into a joint venture that operates under the name Sonoco-Alcore S.a.r.l. The Company contributed ownership positions in 25 tube and core plants and five paper mills to Sonoco-Alcore S.a.r.l. and holds a 64.5% interest in the joint venture. Ahlstrom, a leader in high-performance fiber-based materials serving niche markets worldwide, contributed 14 tube and core plants and one paper mill to Sonoco-Alcore S.a.r.l. and holds a 35.5% interest in the joint venture. Annualized net sales of the operations contributed by Ahlstrom to Sonoco-Alcore S.a.r.l. totaled approximately $102 million for 2004. The Company has accounted for this transaction as an acquisition and, therefore, consolidates the results of the joint venture and reports Ahlstrom’s minority interest as such in its financial statements. While the Company is consolidating the results of the joint venture and reporting the full impact of sales and operating expenses, there is no significant impact on net income, as minority interest is recognized in order to reflect Ahlstrom’s share of after-tax profits. The recognition of minority interest is included in “Income before equity in earnings of affiliates/minority interest in subsidiaries” on the Company’s Consolidated Statements of Income. As part of this transaction, the Company and Ahlstrom have entered into put and call option arrangements as described in Note 14 to the Consolidated Financial Statements.

The Company completed four acquisitions during 2003, with an aggregate cost of approximately $11.1 million. Acquisitions in the Company’s Engineered Carriers and Paper segment included an engineered carriers manufacturer in Australia and a recovered paper operation in Savannah, Ga. The Company also acquired certain assets of a wooden reel manufacturer in Canada and the United States, which were classified as components of All Other Sonoco. In addition, the Company increased its ownership interest in a manufacturer of rotogravure cylinders in Charlotte, N.C., that is included in the Company’s Consumer Packaging segment.

During 2002, the Company purchased a small paper recycling operation in Kansas City, Mo., and Topeka, Kan., and a small, recovered paper trucking operation in Manhattan, Kan., in its Engineered Carriers and Paper segment. In addition, during the fourth quarter of 2002, the Company completed the purchase of a plywood reel operation in Sherman, Texas, and a nailed wooden reel operation in Bonham, Texas. The purchases, which included equipment, inventory and intangible assets, were classified as components of All Other Sonoco. The aggregate cost of all 2002 acquisitions was approximately $8.5 million.

Dispositions

In December 2003, the Company divested its High Density Film business to Hilex Poly Co., LLC, of Los Angeles, Calif., at a price of approximately $81 million in cash and the balance in subordinated notes and preferred nonvoting membership interests, resulting in a gain of approximately $63.1 million pretax ($49.4 million after tax). Operating results of this business are presented as “Income from discontinued operations, net of income taxes” in the Company’s Consolidated Statements of Income for 2003 and 2002. After-tax income contributed by the High Density Film business was approximately $60.8 million and $9.8 million in 2003 and 2002, respectively.

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Other Special Charges and One-Time Items

In 2004, the Company recognized charges of approximately $5.6 million, which the Company incurred to recognize vested commitments to pay future costs associated with new executive life insurance benefits that will replace split dollar life agreements made with key executives since 1995. Due to regulatory changes, the Company was not able to maintain those split-dollar agreements, and the replacement benefits for the affected employees have been provided by the Company to meet the intent and commitments of the previous plan. Also in 2004, the U.S. District Court for the Southern District of Ohio entered a judgment against the Company’s subsidiary, Sonoco-U.S. Mills, and the Company. The Company accrued approximately $4.5 million related to this legal proceeding. The charges recognized for the new executive life insurance benefits and the legal proceeding are included in “Selling, general and administrative expenses” in the Company’s Consolidated Statements of Income. Additionally, 2004 net income was positively affected by approximately $9.3 million due to the recognition of certain tax benefits as a result of the Internal Revenue Service closing its examination of the Company’s tax returns for years 1999 through 2001.

During the fourth quarter of 2004, the Company determined that misstatements were made in the financial statements of its wholly owned subsidiary in Spain, which consists of two engineered carriers plants. The primary impact of these misstatements was an underreporting of expenses over a six-year period totaling approximately $9.4 million, before and after tax, of which $2.2 million was related to restructuring charges as previously discussed. Of the remaining $7.2 million, approximately $1.6 million was associated with the first three quarters of 2004, approximately $1.3 million was associated with 2003, approximately $.3 million was associated with 2002, approximately $1.9 million was associated with 2001 and the remaining amount of approximately $2.1 million was associated with 2000 and prior. As the impact of these misstatements was not material to the reported results of any of the prior periods affected or to the current period, the Company recorded the charge in the fourth quarter.

Results of Operations 2004 versus 2003

Operating Revenue

Consolidated net sales for 2004 were $3.16 billion, versus $2.76 billion in 2003, an increase of approximately $397 million.

The components of the sales change were:

Sales for the year were higher due to increased volumes, higher selling prices, the impact of acquisitions and the favorable impact of foreign exchange rates as the dollar weakened against foreign currencies. Company-wide volume, including the impact of acquisitions, was approximately 10% higher than 2003. Domestic sales were $2.11 billion, up approximately 14% from 2003 and international sales were $1.04 billion, up approximately 16% over 2003.

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Operating Profits

Consolidated operating profits, which represent “Income before income taxes” on the Consolidated Statements of Income for 2004 and 2003, are comprised of the following:

Operating profits for 2004 increased due to higher volumes, the accretive impact of acquisitions and savings resulting from ongoing productivity and purchasing initiatives. Operating profits for 2004 were negatively impacted by higher energy cos